NFL Ordered to Payback Millions to NFL Players

NFL Ordered to Payback Millions to NFL Players

On February 22, 2016, the National Football League (NFL or the “League”) announced that a neutral arbitrator ruled from the bench that they had to pay back what could amount to $120 million to the NFL players.1 More importantly this signifies another example of the dwindling in trust between the NFL and the NFL Players Association (NFLPA or the “Union”). Per Article Twelve, Section Three of the Collective Bargaining Agreement (CBA) between the NFL and the NFLPA, the NFLPA has the right to review financial statements of the NFL and its teams.2 During such a review this past January, the NFLPA noticed a large amount of money being withheld by the League outside of the revenue that is marked to be shared between the NFL and the players.3 However, the withheld money did not qualify for any of the agreed upon exemptions set forth in the CBA.4

The CBA outlines the manner in which money generated from each NFL league year will be divided between the NFL’s teams and owners, and the players of the NFL. Currently, the players receive 40% of local revenues which predominately consist of each teams ticket sales, 45% of sponsorship money, NFL business ventures, and post-season revenue, and 55% of the revenue from media deals agreed to by the NFL.5 However, Article Twelve, Section One, Subsections (v-viii) of the CBA allow for a portion of the money that would normally be included in revenue shared between the NFL and its players to be withheld for future stadium renovation or construction.6 The CBA stipulates that income from Personal Seat Licenses (PSLs),7 Premium Seat Revenue (PSR),8 and Naming Rights/Cornerstone Sponsorships,9 that are dedicated to and used for stadium construction or stadium renovation projects can be withheld from shared revenue.10 The NFLPA agreed to these withholdings because when NFL teams use these funds to improve or create new stadiums, fan excitement and the amount of money grossed by the League typically increase as well.11 Ultimately, this increases the pool of money that will be shared with the players.12

What came to light during the review, however, is that the League created a separate category relating to ticket sales that was not agreed to under the CBA and housed large sums of money within this category.13 NFL owners mislabeled what the Union says was close to $120 million of ticket revenue during the previous three league years by creating an unauthorized exemption.14 This exemption had the repercussions of keeping close to $50 million in salary from the players of the NFL.15 In an uncommon decision from the bench,16 arbitrator, Stephen Burbank, noted that although the provisions within the CBA may be complicated, interpreting the contract is not.17 Burbank decided that the money the owners withheld did not fit into any of the exempted provisions and ordered the NFL to return the aggregate amount to the shared revenue pool immediately.18

The immediate impact of Burbank’s decision is an increase in the players salary cap for the 2016 season of close to $1.5 million per team.19 The salary cap for the 2016 season has been set at $155.27 million, close to a $12 million dollar increase from the 2015 season.20 An NFL spokesperson characterized the incident as the “resolution of a ‘technical accounting issue under the CBA involving the funding of stadium construction and renovation projects.’”21 However, the NFLPA sees a far bigger issue. Eric Winston, President of the NFLPA, commented that it goes to a matter of trust between the NFL, the players, and the fans of the NFL, stating:

The players have seen examples over and over and over now of [the NFL] skirting the rules, or them trying to go around something that was clearly intended, clearly written in a certain way. Whether it’s in personal conduct, whether it’s financial matters now. I mean those things ring very loudly to players and I field a lot of calls about this. I field calls from former players, from current players about this and they’re upset. I mean, this is one of those things that go right to the core of our business is money and you can’t take from somebody and expect [there] not to be some hard feelings, expect to be upset. It hurts everything going forward and it’s unfortunate.22

With this arbitration ruling in favor of the NFLPA coming on the heels of favorable rulings for the NFLPA in last year’s Ray Rice and Tom Brady arbitration and litigation issues,23 the NFL has taken some public backlashing for their actions as of late. As the NFLPA’s audit is ongoing,24 it will be interesting to see if any more questionable tactics by the NFL will be made public.

Personal Seat Licenses (PSLs) – are agreements between an individual and a team that help generate revenue for said team. PSLs give the purchaser the right and obligation to purchase season tickets to all pre-season, regular season, and post-season games for a particular seat within the stadium that a team plays at. PSLs vary in price at different stadiums throughout the NFL ranging from $150,000 to $6,000.↩

Premium Seat Revenue (PSR) – is all revenue that is generated from a stadiums revenue generating private suites and club level seats in within a team’s stadium.↩

Naming Rights/Cornerstone Sponsorships – involve an agreement between NFL teams and businesses that include either the Naming Rights of the team’s stadium, or significant investments by the businesses for sponsorship rights with an individual team.↩

See id.; A salary cap is the total amount of money that the League and Union have collectively agreed on to which an individual team can spend in paying the salaries of all active players a its roster during the NFL season.↩

The NFL has appealed the decision in favor of the NFLPA by the District Court of the Southern District of New York, and the appeal with be heard by the Court of Appeals for the Second Circuit on Thursday, March 3, 2016.↩